Applying Macmillan’s saying that “you’ve never had it so good” to those either in or heading towards retirement might come as a surprise to some people, but new data shows that those retiring today may well be much better off than their younger counterparts.
Research published by the International Longevity Centre (ILC), the UK’s leading authority on demographic change, in conjunctin with Aviva, has found that future generations of retirees are likely to be poorer than those of today – with a startling decline in the share of wealth held by those under 40.
Older generations have owned a disproportionate amount of the nation’s wealth for some time, and it looks like the wealth age gap is widening rather than narrowing. Analysis of ONS population data shows that in 2010/11, people under 40 made up just over half (50.6%) of the total population but held just £7.53 of every £100 of wealth. A decade later the proportion of under 40s slightly declined to 49.5%, but their share of wealth plummeted to just £3.98.
ILC’s “Financially secure?” briefing is the first to be released as part of work to develop a new “Longevity White Paper” highlighting the solutions needed to capitalise on the opportunities of an ageing society.
The spectre of growing pensioner poverty has been looming for many years. For example, in 2017 the ILC revealed that, to achieve the same level of retirement income as current retirees, younger people would need to save up to 20% of their earnings each year. The increase in savings that has come because of auto-enrolment will not be sufficient to close this intergenerational savings gap.
Problems loom for Generation X
But it is not just younger generations that need to save more. ILC research in 2021 showed that “Generation X”, (those born between the mid-60s and the early-80s) who make up one-fifth of the UK’s population, save on average just £200 into their pension pots each month, and one-third of this group is at high risk of retiring with insufficient incomes.
At the same time future generations face additional strains on their finances:
- The number of private renters aged 65 years and above is projected to double by 2046, reaching 12% of all households of this age.
- There are 8.9 million economically inactive adults under 65 in the UK, with over 2.5 million who are long-term sick and others forced to leave the workforce earlier than planned due to caring responsibilities.
David Sinclair, Chief Executive at the International Longevity Centre UK said: “Younger people are already not saving enough to enjoy a decent lifestyle as they age, and our latest analysis shows that younger generations will have even fewer assets available. With the ongoing cost-of-living crisis exerting further pressure on savings, the need for new ideas is clear.
“Pensioner poverty is already a significant issue, and it will grow if we don’t act now. We know that future retirees won’t be able to rely on housing wealth and many will need to spend money on rent into retirement.
“It is crucial that we address these challenges head-on and develop comprehensive strategies to ensure that every generation has the support they need to be financially secure right across their lives.”